Saturday, April 21, 2018

Growth is key to Europe's economic future, Pimco bond expert says

NEW YORK — The struggling countries of Europe have cut spending for two years in hopes of averting financial catastrophe and persuading bond investors to buy their debt. But the world's most influential bond investor thinks it won't work.

Bill Gross, manager of Pimco's $252 billion Total Return Fund, the largest mutual fund, says that countries can't simply cut their way out of the debt crisis.

The countries that use the euro reduced their budget deficits last year, but their economies shrank, too. So their debt increased as a share of their annual economic output. Eight of the 17 euro countries are in recession.

Meanwhile, unemployment in the so-called eurozone is almost 11 percent and rising. Outrage over spending cuts led voters this month to oust leaders in Greece and France who had promoted cuts as a way out of the crisis.

Some questions and answers with the man sometimes called the bond king:

What do you make of the backlash in Europe against deep spending cuts? They were supposed to lure investors like you into buying government bonds from Greece, Portugal, Spain and the like. It doesn't seem to be working.

We do look at the debt levels. It matters. But a bond investor has to look at economic growth, too. If a country can't grow its way out of its predicament, we won't go there. That's why we've stayed out of Europe for the most part.

So the so-called austerity approach — tightening government budgets through spending cuts and tax increases — isn't enough for you. A country can't keep cutting spending and hope prosperity eventually shows up?

Eliminating a budget deficit won't produce growth. It really requires a delicate combination of growth and budget discipline over the longer term.

Paul Krugman, the economist and columnist for the New York Times, has been saying this for years. It's the lesson of the Great Depression: Tightening budgets in an economic slump makes the slump worse.

I'm not a big Krugman advocate. But I agree that you don't cut everything and hope the private markets reward you for it. It has to be a balance. What Europe really needs is to get the private market back in there. They're trying to convince the Pimcos of the world to return (by having the European Central Bank lend to banks), but all the efforts so far use public money. The global marketplace is privately funded. And if the private markets can't be convinced, this crisis is going to be with us for a very long time.

What would it take to convince you to buy bonds from one of the troubled countries?

It takes economic growth, honestly. And it also takes policies that last longer than one or two months. We haven't avoided Europe, entirely. We invest in Germany and France. But we avoid the bad boys and girls because there doesn't appear to be a growth solution to these countries' problems.

Comments

Sundayís sports on TV/radio

TODAYAutosNHRA: SpringNationals2 p.m.FS1IndyCar: Grand Prix of Alabama3 p.m.NBCSNBaseballTwins at Rays1 p.m.Fox Sun; 620-AMMarlins at Brewers2 p.m.FSFIndians at Orioles2 p.m.MLBCubs at Rockies (in progress)4 p.m.MLBNationals at Dodgers8 p.m.ESPNColle...
Updated: 29 minutes ago
Marc Topkinís takeaways from Raysí 10-1 Saturday win over Twins

Marc Topkinís takeaways from Raysí 10-1 Saturday win over Twins

* Is it time to take the leap and believe this is the real Blake Snell? He talked a good game this spring and pitched well in his debut, but that rough second outing raised old doubts. But a good outing in Chicago and two dominant ones on the homesta...
Updated: 1 hour ago
Yankees give top prospect Gleyber Torres a shot in majors

Yankees give top prospect Gleyber Torres a shot in majors

Gleyber Torres cannot help an erratic staff of starting pitchers. Nor can he help shake Giancarlo Stanton from his April funk. But the Yankees hope that calling up Torres from Triple A on Saturday will provide a jolt before they fall much farther beh...
Updated: 1 hour ago
Georgi Hristovís 57th goal ties Rowdies team record

Georgi Hristovís 57th goal ties Rowdies team record

ST. PETERSBURG — Georgi Hristov tied a 40-year-old franchise record with his 57th career goal Saturday at Al Lang Stadium, fueling the Rowdies' 2-0 shutout of previously unbeaten Real Monarchs SLC.Hristov, a forward in his sixth season with Tam...
Updated: 1 hour ago
Rays Tales: How low can this team go compared to those Devil Rays days?

Rays Tales: How low can this team go compared to those Devil Rays days?

When the Rays, in the opening weekend of their 20th anniversary celebration season, brought back and honored the inaugural 1998 Devil Rays squad, it got us thinking unexpected thoughts, such as which was a better team:The first one, or the current on...
Updated: 1 hour ago
Rays Journal: Team effort pays off in 10-1 win over Twins

Rays Journal: Team effort pays off in 10-1 win over Twins

ST. PETERSBURG – Let's be clear here, the Rays still have a long way to go, and a lot of ground to make up.But seeing them play like they did Saturday in beating the Twins 10-1, putting on a solid all-around show in cobbling their first three-g...
Updated: 1 hour ago
Romney must compete in primary for Senate seat

Romney must compete in primary for Senate seat

Mitt Romney has been forced into a Republican primary for a U.S. Senate seat in Utah as he looks to restart his political career by replacing long-serving Sen. Orrin Hatch
Updated: 1 hour ago
Nicaragua's Ortega agrees to talk as deadly protests rage on

Nicaragua's Ortega agrees to talk as deadly protests rage on

Nicaragua's president has agreed to talks with business leaders over controversial social security reforms that sparked four days of protests and clashes
Updated: 1 hour ago
Kyle Busch pulls away at Richmond for 3rd Cup win a row

Kyle Busch pulls away at Richmond for 3rd Cup win a row

Kyle Busch pulled away on a restart in a two-lap overtime sprint to the finish for his third consecutive NASCAR's Cup Series victory
Updated: 1 hour ago
Judge homers, Yankees use 7-run 6th to beat Blue Jays 9-1

Judge homers, Yankees use 7-run 6th to beat Blue Jays 9-1

Aaron Judge hit an early homer off respected Twitter rival Marcus Stroman, then scored on a disputed play during a seven-run burst in the sixth inning that sent the New York Yankees over the Toronto Blue Jays 9-1
Updated: 1 hour ago